Enfcrecomplaint011509

1. •
FlLED IN ClERK'S OFFICE
U.S.D.C. - AI/8nla
JAN I 5zong
. . JAM~ ~TT,E~lClerk
UNITED STATES DISTRICT COURT By1)~6'eik
FOR THE NORTHERN DISTRICT OF GEORGIA .
ATLANTA DIVISION
)
U.S, COMMODITY FUTURES )
TRADING COMMISSION, )
)
Plaintiff, )
) CASiN
v. )
)
CRE CAPITAL CORPORATION, a )
Georgia corporation, and JAMES G. )
OSSIE, an individual, )
)
Defendants. )
- - - - - - - - - - - - )
COMPLAINT FOR PERMANENT INJUNCTION, CIVIL MONETARY
PENALTIES, AND OTHER EQUITABLE RELIEF
Plaintiff, the United States Commodity Futures Trading Commission
("Commission" or CFTC"), by its attorneys, alleges as follows:
I. SUMMARY
1. From at least June 2007 to the present, CRE Capital Corporation
("CRE Capital"), through its principal and control person, James G. Ossie
("Ossie") (collectively, "Defendants"), solicited approximately $25 million from
more than 120 members ofthe general public for the purported purpose oftrading
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2. off-exchange foreign currency contracts. Defendants offered "30 Day Currency
Trading Contracts," which guaranteed 10 percent return (the "ROI") in 30 days,
the equivalent of an annual percentage rate ofmore than 120 percent. The
purported minimum investment is $100,000; however, Defendants permitted
prospective customers to pool their funds with other prospective customers in order
to reach the minimum.
2. Defendants claimed that the ten percent monthly guaranteed ROI was
produced by their successful trading ofUnited States and Japanese currency
contracts. In fact, Defendants' futures trading resulted in substantial losses and any
purported ROI or other "profits" paid to customers came from existing customers'
original principal and/or from money invested by subsequent customers.
3. Prospective customers were told that the program involved very little
risk because Defendants had established a large reserve fund. The reserve funds
were purportedly not traded or exposed to any risk and were available to pay the 10
percent ROI, plus redeemed principal, ifDefendants' trading activities were less
profitable than expected in any particular month.
4. By virtue ofthis conduct and the further conduct described herein,
Defendants have engaged, are engaging, or are about to engage in acts and
practices in violation ofprovisions ofthe Commodity Exchange Act (the "Act"), 7
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3. U.S.c. §§ 1 et seq. (2006), as amended by the Food, Conservation, and Energy Act
of 2008, Pub. L. No. 110-246, Title XIII (the CFTC Reauthorization Act ("CRA"),
§§ 13101-13204, 122 Stat. 1651 (effective June 18,2008).
5. Ossie committed the acts and omissions described herein within the
course and scope ofhis employment at CRE Capital. Therefore, CRE Capital is
liable under Section 2(a)(1)(B) ofthe Act, 7 U.S.c. § 2(a)(l )(B) (2006), and
Commission Regulation ("Regulation") 1.2, 17 C.F.R. § 1.2 (2008), as principal
for CRE Capital's violations of the Act.
6. Ossie is liable under Section 13(b) ofthe Act, 7 U.S.C. § 13c(b)
(2006), as a controlling person ofCRE Capital for its violations of the Act, because
he did not act in good faith or knowingly induced, directly or indirectly, the acts
constituting the violations.
7. Accordingly, pursuant to Section 6c ofthe Act, 7 U.S.C. § 13a-1
(2006), and Section 2(c)(2) ofthe Act as amended by the CRA, to be codified at
7 U.S.C. § 2(c)(2), the Commission brings this action to enjoin Defendants'
unlawful acts and practices and to compel their compliance with the Act and to
further enjoin Defendants from engaging in any commodity-related activity. In
addition, the Commission seeks civil monetary penalties and remedial ancillary
relief, including, but not limited to, trading and registration bans, restitution,
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4. disgorgement, rescission, pre- and post-judgment interest, and such other relief as
the Court may deem necessary and appropriate.
8. Unless restrained and enjoined by this Court, Defendants are likely to
continue to engage in the acts and practices alleged in this Complaint and similar
acts and practices, as more fully described below.
II. JURISDICTION AND VENUE
9. Section 6c(a) ofthe Act, 7 U.S.c. § 13a-1 (2006), authorizes the
Commission to seek injunctive reliefagainst any person whenever it shall appear
to the Commission that such person has engaged, is engaging, or is about to engage
in any act or practice constituting a violation ofthe Act or any rule, regulation, or
order thereunder.
10. The Commission has jurisdiction over the transactions at issue in this
case pursuant to Section 2(c)(2) ofthe Act as amended by the CRA, to be codified
at 7 U.S.c. § 2(c)(2), for conduct that occurred after June 18,2008, the relevant
effective date ofthe CRA. The CRA, among other things, clarified the
Commission's anti-fraud jurisdiction over off-exchange foreign currency
transactions ofthe type offered by Defendants. Section 2(c)(2) ofthe Act as
amended by the CRA, to be codified at 7 U.S.C. § 2(c)(2). Defendants' foreign
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5. currency transactions and conduct that occurred on or after June 18, 2008 are
therefore subject to the Commission's jurisdiction.
11. Venue properly lies with the Court pursuant to Section 6c(e) ofthe
Act, 7 U.S.C. § 13a-l(e) (2008), because Defendants transacted business in the
Northern District of Georgia and certain ofthe transactions, acts, practices, and
courses of business alleged occUlTed, are occurring, and/or are about to occur
within this District.
III. PARTIES
12. Commodity Futures Trading Commission is an independent
federal regulatory agency that is charged with the administration and enforcement
ofthe Act, 7 U.S.C. §§ 1 et seq., and the Regulations promulgated thereunder, 17
c.P.R. §§ 1.1 et seq. The CPTC maintains its principal office at Three Lafayette
Centre, 1155215t Street, NW, Washington, D.C. 20581.
13. CRE Capital Corporation is a Georgia corporation fonned on
March 26, 2007, with its principal place of business at 3700 Mansell Road, Suite
220, Alpharetta, Georgia 30022. CRE Capital has never been registered with the
CFTC.
14. James G. Ossie resides in Dawsonville, Georgia, and is President,
CEO, and sole owner and director ofCRE Capital. At all material times, CRE
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6. Capital was wholly owned by Ossie, who held himself out to the public as the
owner and operator of CRE Capital and who solicited members ofthe public to
invest with CRE Capital by, as described below, holding periodic conference calls
with potential customers in which Ossie described the purported investments to
them and made various misrepresentations. Ossie has never been registered with
the CFTC.
IV. FACTS
15. On or about June 2007, CRE Capital, through its principal and
control person, Ossie, began to solicit members ofthe general public to trade
foreign currency through "30 Day Currency Trading Contracts." These contracts
guaranteed 10 percent ROT in 30 days. To date, Defendants have raised more than
$25 million from over 120 customers, only some of which was used to trade
foreign currency. Approximately $20 million of customer funds was received by
Defendants after June 18,2008.
16. Defendants allowed customers to enter into contracts of$100,000,
$300,000, $500,000, $1 million, $5 million, and $10 million, and permitted
customers with less than $100,000 to join their funds with those ofother customers
in order to reach the $100,000 minimum level.
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7. 17.. At the end ofeach 30 day period, all customers received their 10
percent ROJ by wire transfer. Customers could chose to obtain a refund oftheir
principal at this time, roll over their principal into a new 30 Day Currency Trading
Contract, or invest additional funds to open a new 30 Day Currency Trading
Contract in a higher amount.
18. Defendants recruited most, and possibly all, of its customers through
its "correspondents," which are located throughout the United States. Each
"correspondent" has its own internet website, requiring a password and user
identifIcation to access.
19. Ossie held periodic conference calls with the correspondents and
potential customers in which he described the program to them. On these
conference calls, CRE Capital, through Ossie, made various misrepresentations, as
described below.
20. Defendants represented to customers that the monthly 10 percent ROJ
paid to customers was produced by profits from their foreign currency trading.
This representation was false. Defendants' foreign currency trading resulted in
substantial losses, and the purported 10 percent ROJ or other "profits" were paid to
customers from existing customers' original principal and/or from money invested by
subsequent customers.
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8. 21. In April 2008, Defendants opened a trading account in the name of
CRE Capital at Gain Capital Group, LLC ("Gain Capital"), a registered Futures
Commission Merchant ("FCM"). Ofthe approximately $25 million received by
Defendants from customers, $5.35 million was deposited into this trading account.
Since June 18,2008, Defendants, for the benefit oftheir customers, traded foreign
currency futures in this account and incurred total trading losses, including
commissions and fees, of more than $4 million. Furthermore, during this same
period, Defendants withdrew more than $1 million of customer funds from this
trading account.
22. On or about December 2, 2008, Defendants represented to Gain Capital
that all ofthe funds deposited by Defendants in its Gain Capital trading account were
contributed solely by Defendants and that Defendants did not accept or receive
customer funds. These statements were false. Defendants solicited and used
customer fund to trade futures at Gain Capital.
23. Defendants also represented to customers that the 30 Day Currency
Trading program was audited by the Robert Half firm. That statement was false.
24. Defendants told customers repeatedly that Defendants had sufficient
funds on hand to return all customers' principal and ROI within a 30 day period of
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9. time as the contracts matured. This statement was false. In fact, Defendants could
not repay all oftheir customers ifthey requested return oftheir principal and ROI.
25. Upon information and belief, on or about January 9,2009,
Defendants represented to customers on a conference call that Defendants could no
longer make ROI payments to customers because the United States Securities and
Exchange Commission ("SEC") purportedly had frozen CRE Capital's accounts.
This statement was false since the SEC had not frozen Defendants' accounts or
other assets.
26. Neither Defendants nor the FCM that was the counterparty to the
foreign currency transactions were financial institutions, registered broker dealers,
insurance companies, bank holding companies, or investment bank holding
companies or the associated persons of financial institutions, registered broker
dealers, insurance companies, bank holding companies, or investment bank
holding companies.
27. Some or all of Defendants' customers were not "eligible contract
participants" as that term is defined in the Act. See Section la(12)(A)(xi) ofthe
Act, 7 U.S.C. § 1a(12) (2006) (an "eligible contract participant," as relevant here,
is an individual with total assets in excess of(i) $10 million, or (ii) $5 million and
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10. who enters the transaction "to manage the risk associated with an asset owned or
liability incurred, or reasonably likely to be owned or incurred, by the individual").
28. The foreign currency transactions conducted by Defendants at Gain
Capital on behalf oftheir customers were entered into on a leveraged or margined
basis. Defendants were required to provide only a percentage ofthe value ofthe
foreign currency contracts that they purchased.
29. The foreign currency transactions conducted by Defendants neither
resulted in delivery within two days nor created an enforceable obligation to
deliver between a seller and a buyer that had the ability to deliver and accept
delivery, respectively, in connection with their lines ofbusiness. Rather, these
foreign currency contracts remained open from day to day and ultimately were
offset without anyone making or taking delivery of actual currency (or facing an
obligation to do so).
30. By virtue oftheir actions, Defendants have engaged, are engaging, or
are about to engage in acts and practices that violate Sections 4b(a)(2)(A) and (C) of
the Act as amended by the CRA, to be codified at 7 U.S.C. §§ 6b(a)(2)(A) and (C).
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11. V. VIOLATIONS OF THE COMMODITY EXCHANGE ACT
COUNT I
Violations of Sections 4b(a)(2)(A) and (C) ofthe Act as amended by the CRA,
to be codified at 7 U.S.C. §§ 6b(a)(2)(A) and (C)
(Fraud by Misrepresentations and Omissions)
31. The allegations set forth in paragraphs 1 through 30 are realleged and
incorporated herein by reference.
32. Sections 4b(a)(2)(A) and (C) ofthe Act as amended by the CRA, to
be codified at 7 U.S.C. §§ 6b(a)(2)(A) and (C), make it unlawful
for any person, in or in connection with any order to make, or
the making of, any contract of sale of any commodity for future
delivery, or other agreement, contract, or transaction subject to
paragraphs (1) and (2) of section 5a(g), that is made, or to be
made, for or on behalf of, or with, any other person, other than
on or subject to the rules of a designated contract market - (A)
to cheat or defraud or attempt to cheat or defraud the other
person; ... [or] (C) willfully to deceive or attempt to deceive
the other person by any means whatsoever in regard to any
order or contract or the disposition or execution of any order or
contract, or in regard to any act of agency performed, with
respect to any order or contract for or, in the case of paragraph
(2), with the other person.
Sections 4b(a)(2)(A) and (C) ofthe Act as amended by the CRA apply to
Defendants' foreign currency transactions "as if' they were a contract of sale
ofa commodity for future delivery. Section 2(c)(2)(C)(iv) ofthe Act as
amended by the CRA.
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12. 33. As set forth above, from at least June 18,2008, through the present,
in or in connection with foreign currency contracts, made, or to be made, for or on
behalf ofother persons, Defendants cheated or defrauded or attempted to cheat or
defraud customers or prospective customers and willfully deceived or attempted to
deceive customers or prospective customers by, among other things, knowingly (i)
misrepresenting that the ten percent monthly ROJ is produced by Defendants'
futures trading, when, in fact, Defendants' foreign currency trading resulted in
substantial losses, and these purported "profits" were paid to customers from existing
customers' original principal and/or from money invested by subsequent customers;
(ii) misrepresenting that Defendants had sufficient funds on hand to return all
customers' principal and ROI within a 30 day period of time as the contracts
matured; (iii) misrepresenting that the 30 Day Currency Trading program was
audited by the Robert Half firm when, in fact, it was not; and (iv) falsely claiming
to customers that Defendants could no longer make ROJ payments to customers
because the SEC had allegedly frozen its accounts, all in violation of Sections
4b(a)(2)(A) and (C) ofthe Act as amended by the CRA, to be codified at 7 U.S.C.
§§ 6b(a)(2)(A) and (C).
34. Defendants engaged in the acts and practices described above
knowingly or with reckless disregard for the truth.
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13. 35. Ossie controlled CRE Capital, directly or indirectly, and did not act in
good faith or knowingly induced, directly or indirectly, CRE Capital's conduct
alleged in this Count. Therefore, pursuant to Section l3(b) ofthe Act, 7 U.S.C.
§ l3c(b) (2006), Ossie is liable for CRE Capital's violations of Sections
4b(a)(2)(A) and (C) ofthe Act as amended by the CRA, to be codified at 7 U.S.C.
§§ 6b(a)(2)(A) and (C).
36. The foregoing acts, misrepresentations, omissions, and failures of
Ossie occurred within the scope ofhis employment with CRE Capital; therefore,
CRE Capital is liable for these acts pursuant to Section 2(a)(l)(B) ofthe Act, 7
U.S.C. § 2(a)(1 )(B) (2006), and Regulation 1.2, 17 C.F.R. § 1.2 (2008).
37. Each misrepresentation or omission ofmaterial fact, including but not
limited to those specifically alleged herein, is alleged as a separate and distinct
violation of Sections 4b(a)(2)(A) and (C) ofthe Act as amended by the CRA, to be
codified at 7 U.S.C. §§ 6b(a)(2)(A) and (C).
VI. RELIEF REQUESTED
WHEREFORE, the CFTC respectfully requests that the Court, as
authorized by Section 6c ofthe Act, 7 U.S.C. § 13a-l, and pursuant to its own
equitable powers, enter:
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14. a) An order finding that Defendants violated Sections 4b(a)(2)(A) and
(C) ofthe Act as amended by the CRA, to be codified at 7 U.S.c. §§ 6b(a)(2)(A)
and (C).
b) An order of permanent injunction prohibiting Defendants and any of
their agents, servants, employees, assigns, attorneys, and persons in active concert or
participation with any Defendant, including any successor thereof, from engaging,
directly or indirectly:
(i) in conduct in violation of Sections 4b(a)(2)(A) and (C) ofthe
Act as amended by the CRA, to be codified at 7 U.S.c. §§ 6b(a)(2)(A) and
(C); and
(ii) in any activity related to trading in any commodity, as that term
is defined in Section la(4) ofthe Act, 7 U.S.C. § la(4) (2006) ("commodity
interest"), including but not limited to, the following:
(aa) from trading of any commodity interest account for
themselves or on behalfofany other person or entity;
(bb) from soliciting, receiving, or accepting any funds in
connection with the purchase or sale ofany commodity interest
contract;
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15. (cc) from applying for registration or claiming exemption
from registration with the CFTC in any capacity, and engaging in any
activity requiring such registration or exemption from registration
with the CFTC, except as provided for in Regulation 4. 14(a)(9),
17 C.F.R. § 4. 14(a)(9) (2008), or acting as a principal, agent, or any
other officer or employee ofany person registered, exempted from
registration or required to be registered with the CFTC, except as
provided for in Regulation 4.14(a)(9); and
(dd) from engaging in any business activities related to
commodity interest trading.
c) An order directing Defendants, as well as any successors to any
Defendant, to disgorge, pursuant to such procedure as the Court may order, all
benefits received from the acts or practices which constitute violations ofthe Act,
as described herein, and pre- and post-judgment interest thereon from the date of
such violations;
d) An order directing Defendants to make full restitution to every person
or entity whose funds Defendants received or caused another person or entity to
receive as a result of acts and practices that constituted violations ofthe Act, as
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16. described herein, and pre- and post-judgment interest thereon from the date of such
violations;
e) Enter an order directing Defendants and any successors thereof, to
rescind, pursuant to such procedures as the Court may order, all contracts and
agreements, whether implied or express, entered into between them and any of the
customers whose funds were received by them as a result ofthe acts and practices
which constituted violations ofthe Act, as described herein;
f) An order directing Defendants to make an accounting to the Court of
all their assets and liabilities, together with all funds they received from and paid to
customers and other persons in connection with transactions or purported
transactions alleged in the Complaint, and all disbursements for any purpose
whatsoever of funds received from or relating to the transactions alleged in the
Complaint, including salaries, commissions, interest, fees, loans, and other
disbursements ofmoney and property ofany kind from January I, 2007 to the date
of such accounting;
g) An order directing each Defendant to pay a civil monetary penalty in
the amount ofthe higher of $140,000 for each violation ofthe Act committed or
triple the monetary gain to each Defendant for each violation ofthe Act described
herein, plus post-judgment interest;
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17. h) An order requiring Defendants to pay costs and fees as permitted by
28 U.S.C. §§ 1920 and 2412(a)(2); and
i) Such other and further reliefas the Court deems proper.
David E. Nahmias
United States Attorney
[).1Q~
Daniel A. Caldwell, Esq.
Assistant U.S. Attorney
Georgia Bar No. 102510
600 Richard B. Russell Federal Bldg.
75 Spring Street, S.W.
Atlanta, GA 30303
(404) 581-6224
(404) 581-6181 (fax)
Daniel Jordan, Esq.
James Deacon, Esq.
William Small, Esq.
Commodity Futures Trading
Commission
Division of Enforcement
1155 21st Street, N.W.
Washington, DC 20581
(202) 418-5339
(202) 418-5531 (fax)
Counsel for Plaintiff
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